Panama Free Zone

The Colon Free Trade Zone, on the Caribean entrance to the Panama Canal was established in 1948 and is the largest trade free zone in the Americas, as well as the second largest in the world. The trade zone is a major drawcard for visitors from surrounding South American and North American countries, as well as a large contributor to the economy of Panama.

The success of this region is attributed to the strategic position of Panama, being in close proximity to the States and the Central and South American economic purchasing communities. The legal environment encourages business development by not over legalizing trade and business establishment in the area, as well as the ready supply of banking establishments and services ensure positive growth and development in this area. The country of Panama has also invested sufficiently in infrastructure as well as port and transportation facilities which encourage trade in this region. The fact that the United States dollar is legal tender in Panama contributes to the stability of the region. The products that are most often imported into the Free Trade Zone include watches, perfumes, electronics, clothing, appliances, cigarettes and liquor.

The largest contributors to the trade free zone are Hong Kong, Taiwan and the United States. And the largest buyers are Colombia, Venezuela and the domestic market of Panama itself. This zone allows the free movement of goods and substiantially reduced income taxes on earnings from the re-export activities and sales. Tax exemptions imports and export of capital and payment of dividends are applicable, whilst companies and firms located in the trade free zone are exempt from import duties as well as from licensing, guarantees and other limitations on imports.

Companies with the trade zone can be engaged in a number of types of activities, which include Re-export of goods, sales within Panama’s customs territory, direct sales to foreign clients, and internal sales transfers. The area provides many tax incentives and trade advantages, making it an ideal centre for both local and foreign trade establishments. Ways to establish premises or presence in this area are controlled and one can go about establishing via land leases with warehouse or facility construction within the zone, purchasing existing facilities, memorandum of agreement with existing tenant(s) already established in the zone, and leasing of a public warehouse administered and operated by the Colon Free Trade Zone administration. These are broad and general descriptions of the options available and need further investigation and analysis prior to committing to establishment in this region.

The area of the trade free zone encompasses over 400 hectares and has restored Colon to its colonial era glory, of times when the Spanish explorers were forwarding their gold and captured treasures back to Spain.